UPDATE 1-Indian panel recommends $5.2 bln airwaves surcharge

Monday, 8 Oct 2012 | 9:54 AM ET

SHARES

* Move to hit Bharti, Idea, Reliance Comm, Vodafone

* Officials say surcharge will create level playing field

(Adds detail, share movement)

By Devidutta Tripathy

NEW DELHI, Oct 8 (Reuters) - Long-established Indian mobile operators face a total surcharge of at least 270 billion rupees ($5.2 billion) to continue using the airwaves, reflecting an expected rise in prices paid by newer rivals in an upcoming auction.

The sale, from which the government hopes to raise 400 billion rupees, was the result of the Supreme Court revoking permits issued in a scandal-tainted auction in 2008. That did not affect older carriers who already had spectrum.

The total 670 billion rupees will be a timely windfall for a government looking to rein in a ballooning fiscal deficit.

The good news on Monday for the companies - including Bharti Airtel , Reliance Communications , and Vodafone's Indian unit - was that the surcharge will not be backdated, and telecoms stocks rose in Mumbai.

A ministerial panel recommended mobile phone carriers be charged for existing second-generation (2G) airwave holdings based on the price at the auction, officials said on Monday.

The panel has recommended to the federal cabinet that GSM-based carriers be asked to pay for airwaves beyond 4.4 megahertz at the auction-determined price, while CDMA carriers pay for holdings beyond 2.5 megahertz, said senior government officials who declined to be named. The cabinet has the final say.

India, which traditionally bundled airwaves with telecom permits, is selling 2G airwaves for the first time through an auction at a minimum bid price of 140 billion rupees for 5 megahertz of airwaves for all the country's 22 telecoms zones.

The auction base price is more than seven times what carriers paid in earlier state sales.

"You have companies who now have to pay through their nose in the auction and you have got other companies which were given cheaper spectrum," one of the officials said. "In this very complex situation what do you do, which can give a level playing field and a fillip to the industry."

Reliance Communications and Tata Teleservices are predominantly CDMA-based carriers and do not have much airwave holding beyond 4.4 MHz in the GSM segment. But they will have to pay for the extra airwave they hold in the CDMA business.

The panel has recommended the older companies be allowed to pay part of the new fee upfront and the balance in instalments.

Bharti was expected to pay 48 billion rupees as the fee, while Idea and Vodafone were estimated to pay 18 billion rupees and 23 billion rupees, respectively, according to Vivekanand Subbaraman, telecoms analyst at MF Global Sify Securities in Mumbai.

Shares in Bharti and Idea Cellular also jumped on what, analysts said, was a reaction to the recommendation the fee not be charged retrospectively.

Idea is set to lose seven operating licences and has to bid in the auction to win them back.

The panel also recommended the fees paid in 2008 by those telecom operators set to lose their permits after the court order be adjusted against the price in the auction or be refunded, the officials said.